Equity release

Equity release is a means of retaining use of your house or other object which has capital value, while also obtaining a lump sum or a steady stream of income, using the value of the house.

The "catch" is that the income-provider must be repaid at a later stage, usually when you die. Thus equity release is particularly useful for elderly persons who do not intend or are not able to leave a large estate for their heirs when they die. The reverse mortgage is a form of equity release that is available in Australia, Canada and the United States.

Types of arrangement



United Kingdom

The UK equity release market is basically made up of two types of equity release plan. The most popular plan is a lifetime mortgage - where the homeowner retains ownership of the property but the property is charged with the repayment of a loan or mortgage, which accrues rolled-up interest over the period of the homeowner's lifetime. To help customers decide whether equity release is right for them, a number of companies provide a free equity release calculator to show a rough estimate of the amount of equity that could be released.

The other type of plan is a reversion plan - where the homeowners sells all or part of the property to the equity release provider in return for a right to remain there rent free.

The UK equity release market is now fully regulated. Both lifetime mortgages and home reversion plans now fall under the remit of the Financial Conduct Authority (FCA). Prior to FCA regulation, many lenders signed up to Equity Release Council (ERC) formerly known as Safe Home Income Plans (SHIP), a voluntary code of conduct that provides a number of guarantees.

ERC was formed in 1991 in an attempt to improve the equity release market and its previous poor reputation. The ERC guarantees include a guaranteed right to remain living in the property which is the subject of the equity release, either for life or until entry into long term care. In addition there is a vital No Negative Equity Guarantee - which essentially guarantees that the amount to repay the equity release plan on death or entry into long term care can never exceed the value of the property itself, and so no debt can ever be left behind for beneficiaries of the equity release borrower. In 2012, SHIP rebranded as the Equity Release Council (ERC) and extended its reach to Equity Release advisers as well as product providers.

The current members of ERC include Aviva, Bridgewater, Hodge Lifetime, Just Retirement, LV=, More 2 Life, Legal & General Home Finance (formerly New Life), Partnership, Retirement Plus, Stonehaven and Pure Retirement.

Whilst a number of equity release providers, most notably Prudential, exited the market in the wake of the Credit Crunch, this trend has been reversed since the end of 2010, with a number of these companies - including More 2 Life, New Life and Stonehaven - keen to attract new customers once again.

In 2010, around £800 million of equity was released by UK home owners using regulated equity release with this rising year on year to £1.38 billion in 2014.

United States

Main article: Reverse mortgage

See also


    This article is issued from Wikipedia - version of the 10/30/2016. The text is available under the Creative Commons Attribution/Share Alike but additional terms may apply for the media files.